Volume 1 – Powell and Xi Learn All About Constraints

Clocktower Group

Marko Papic

Research

18 Pages

Clocktower Group explores how material constraints shape policy choices for Federal Reserve Chair Jay Powell and Chinese President Xi Jinping. Using Russia’s recent experience as a cautionary tale, the piece argues that political, social, and economic limits will likely cap Fed hawkishness and push Beijing toward continued stimulus rather than drastic tightening.

Date published: July 2023

Key Takeaways

Material constraints lens: Policymakers confront hard economic and political limits that eventually override even strongly held preferences.
Fed reaction function: With inflation easing and policy lags long, the Fed is unlikely to engineer a deep recession.
China policy stance: Beijing prioritizes broad economic stability over housing metrics and keeps stimulus flowing until growth convincingly steadies.
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